Stablecoin Trading in Korea: Why Volumes Are Dropping and What’s Next

Understanding the Decline in Stablecoin Trading Volume in Korea

South Korea, once a thriving hub for cryptocurrency activity, has experienced a sharp decline in stablecoin trading volumes. Daily trading volumes for stablecoins have dropped by 80%, falling from ₩1 trillion ($730 million) in December 2024 to just ₩200 billion ($146 million) by June 2025. This decline mirrors the broader contraction of South Korea's cryptocurrency market, which has shrunk from ₩17.1 trillion in daily trading volume to ₩3.2 trillion over the same period.

Why Is Stablecoin Trading Declining in Korea?

Several key factors contribute to the significant drop in stablecoin trading volumes in South Korea:

Limited Use Cases for Stablecoins

Globally, stablecoins are widely used for derivatives trading, cross-border payments, and decentralized finance (DeFi) applications. However, South Korea has yet to fully integrate stablecoins into its financial ecosystem. This limited utility has reduced their appeal among Korean traders, who primarily focus on speculative trading rather than practical applications.

Regulatory Uncertainty

South Korea's government is still developing a comprehensive regulatory framework for stablecoins. Concerns over capital flight, unmonitored capital flows, and foreign exchange oversight have led to calls for tighter regulations. This regulatory uncertainty has discouraged market participation and stifled innovation in the stablecoin sector.

Market Contraction

The overall contraction of South Korea's cryptocurrency market has also impacted stablecoin trading. With fewer participants and lower trading volumes across the board, stablecoins have not been immune to the downturn.

Comparing South Korea’s Stablecoin Usage with Global Markets

Globally, stablecoins have become a cornerstone of the cryptocurrency ecosystem, facilitating payments, DeFi applications, and more. However, South Korea lags behind due to limited use cases and regulatory hurdles.

Global Trends

• United States: The U.S. is driving stablecoin adoption through initiatives like the GENIUS Act, which aims to establish a clear regulatory framework for stablecoins.

• China: China’s yuan-backed stablecoin initiatives are integrating digital currencies into payment systems and financial services, setting a benchmark for other nations.

South Korea’s Approach

In contrast, South Korea has focused more on speculative trading rather than leveraging stablecoins for practical applications like payments or remittances. This narrow focus has limited the growth and adoption of stablecoins in the country.

The Bank of Korea’s Pause on the Digital Won Project

The Bank of Korea (BoK) has paused its central bank digital currency (CBDC) project, the digital won, citing high costs, limited commercial incentives, and lukewarm participation from banks. This decision marks a shift in priorities, allowing the private sector to take the lead in stablecoin development.

Implications of the Pause

• Private Sector Innovation: With the BoK stepping back, private companies are accelerating efforts to develop won-pegged stablecoins. This shift could foster innovation and competition in the stablecoin market.

• Regulatory Challenges: The absence of a state-backed digital currency places greater responsibility on regulators to oversee private sector initiatives and ensure monetary stability.

Private Sector Initiatives for Won-Pegged Stablecoins

South Korea’s private sector is stepping up to fill the gap left by the BoK. Major banks, fintech platforms, and blockchain firms are planning to launch won-pegged stablecoins by 2025–2026. Notable developments include:

• Naver Financial and Dunamu Collaboration: Naver Financial, leveraging its payment infrastructure, and Dunamu, the operator of Upbit, are collaborating on a Korean won-pegged stablecoin project. This partnership aims to create a seamless ecosystem for stablecoin issuance and distribution.

• Reducing the Kimchi Premium: Won-pegged stablecoins could address the "kimchi premium," the price gap between cryptocurrencies traded in Korea and global markets. By providing a stable, won-backed digital asset, these initiatives could help align Korean cryptocurrency prices with global benchmarks.

Regulatory Frameworks and Legislation for Stablecoins in South Korea

The South Korean government is actively working on stablecoin legislation to ensure monetary stability and prevent capital flight. Key aspects of the proposed regulatory framework include:

• Monetary Stability: Regulations aim to ensure that stablecoins are adequately backed by reserves and do not pose risks to the broader financial system.

• Capital Flight Prevention: Tighter oversight of cross-border stablecoin transactions is being considered to prevent unmonitored capital flows.

• Consumer Protection: The government is focusing on protecting consumers from potential risks associated with stablecoin usage, such as issuer insolvency or fraud.

Global Stablecoin Trends Influencing South Korea

South Korea’s approach to stablecoin development is being shaped by global trends, including:

• U.S. GENIUS Act: This legislation aims to establish a regulatory framework for stablecoins in the U.S., setting a precedent for other countries.

• China’s Yuan-Backed Stablecoin: China’s digital yuan initiative is influencing South Korea’s strategy, highlighting the geopolitical implications of stablecoin innovation.

Potential Benefits of Won-Pegged Stablecoins

Won-pegged stablecoins could offer several advantages for South Korea’s financial ecosystem:

• Reducing the Kimchi Premium: By aligning cryptocurrency prices in Korea with global markets, won-pegged stablecoins could eliminate the price disparities that have long plagued Korean traders.

• Enhancing Financial Inclusion: Stablecoins could provide unbanked and underbanked populations with access to digital financial services.

• Facilitating Cross-Border Payments: Won-pegged stablecoins could streamline cross-border transactions, reducing costs and improving efficiency.

Concerns Over Capital Flight and Foreign Exchange Monitoring

Despite their potential benefits, stablecoins also raise concerns about capital flight and foreign exchange oversight. Regulators are particularly wary of unmonitored capital flows that could destabilize the economy. To address these concerns, South Korea is likely to implement stringent monitoring and reporting requirements for stablecoin transactions.

Conclusion: The Future of Stablecoin Trading in Korea

While stablecoin trading volumes in South Korea have declined, the market is far from stagnant. Private sector initiatives, regulatory developments, and global trends are shaping the future of stablecoins in the country. As South Korea navigates these challenges and opportunities, the integration of stablecoins into its financial ecosystem could unlock new possibilities for innovation and growth.